Our results

Half year 2009 financial highlights

The National Australian Bank Group has generated cash earnings of AUD$2 billion for the March 2009 half year, a decrease of 9.4% over the March 2008 half year. Underlying business performance remains sound, with underlying profit up 17.4% to AUD$4.7 billion.

Revenue increased 11.5% when compared to the March 2008 half year (up 11.0% excluding exchange rate variances). Group revenue growth was strong despite rapidly emerging weakness across the relevant economies. Australia Banking and nabCapital* Global Markets Division were particular areas of strength. Australia Banking achieved robust business lending growth and effective margin management.

nabCapital* Global Markets Division benefited from market volatility with increased cross-sell to business customers, improved margins and a strong trading performance. This has been partially offset by lower revenues in the UK Region, where significantly higher funding costs could not be fully passed on to customers, and in MLC through the impact of declining investment markets on funds under management. While system lending growth has slowed in all markets, the Group has achieved satisfactory growth in lending volumes, with average lending volumes growing by 10.3% since March 2008 to AUD$389.3 billion. Average retail deposit growth has been solid in a competitive market, up 18.7%.

Operating expenses have increased 4.8% (up 4.0% excluding foreign exchange) from March 2008. Excluding Great Western Bank (GWB), for which there were no expenses in the March 2008 half year, expenses are up AUD$110 million or 3.1% (2.7% excluding foreign exchange). All regions have again demonstrated their capability in sustainable underlying cost management. The Group estimates that cost growth for the full year will remain within inflation.

Deterioration in economic conditions has led to a decline in asset quality across all businesses, as would be expected in the current environment:

• Gross impaired assets to Gross loans and -acceptances has weakened 40 basis points from 0.49% at 30 September 2008 to 0.89% at 31 March 2009.
• The Group charge to provide for bad and doubtful-debts for the March 2009 half year was AUD$1,811 million. The specific provision charge was AUD$1,205 million, of which almost a third relates to a small number of corporate impairments. The remainder of the specific charge is mainly from a number of small provisions, mostly within the corporate and business portfolios. The collective provision charge was AUD$606 million, reflecting a decline in customer credit ratings across all businesses. Included within this amount is AUD$86 million, which has been added to the Group’s economic cycle reserve to further strengthen the Group’s balance sheet against the continuing deterioration in global economies. The Group’s collective provision to credit risk-weighted assets (ex. housing) coverage ratio is now 1.38%. The Group has continued to closely monitor it’s lending portfolio and is satisfied that provisioning levels reflect the quality of the assets held.